GENCOs sue FG over allege unfair practices, demand payment of N1trn debt
THE Power Generation Companies in Nigeria (GENCOs) have instituted a legal action against the Federal Government of Nigeria, alleging deliberate meting out discriminatory treatment to them and their gas suppliers. Power The GENCOs indicated that the government’s intention was to harm their business interests while giving preferential treatment on Azura Power West Africa Limited and Accugas Limited to the detriment of the Nigerian Electricity Supply Industry and the power sector as a whole.
In the suit filed at the Federal High Court, Abuja, the GENCOs, represented by Mainstream Energy Solutions Limited (Mainstream), Transcorp Power Limited (Transcorp Power), Egbin Power Plc (Egbin) and Northsouth Power Company Limited (Northsouth), who are all Plaintiffs in the suit. The defendants in the suit are the Federal Government of Nigeria (FG), Central Bank of Nigeria (CBN), Minister of Power, Works & Housing, Nigeria Bulk Electricity Trading Plc (NBET), Azura Power West Africa Limited (Azura) and Accugas Limited (Accugas). The contention of the GENCOs are that the FG and its agencies have treated and intends to continue treating the GENCOs, their investors and suppliers unfairly and in a discriminatory manner, notwithstanding the fact that the GENCOs have been bending backwards to continue generating electricity for the national grid. They argued that the GENCOs have made huge sacrifices, bearing the excruciating burden of not being paid for electricity generated and sold to NBET, and facing the threat of going into extinction as a result of their huge indebtedness to banks and financiers who provided the foreign currency-denominated acquisition loans with which the power plants were acquired from the FG.
The GENCOs claimed that NBET has consistently defaulted in paying them for all electricity generated and put on the national grid in breach of its contractual obligation, which required that the GENCOs be paid in fully (100%) not later than 45 days of invoice submission, and upon delay in payment be paid with interest at the agreed rate. By reason of the failure of NBET to pay the GENCOs, they (the GENCOs) argued that they have been forced to default in meeting their obligations to their lenders, O&M contractors, equipment manufacturers, Service providers and other persons and entities engaged by the GENCOs for the purpose of ensuring the smooth and effectual generation of power in all power plants owned, controlled and/or managed by the GENCOs. They stated that the failure to pay the GENCOs their entitlement for electricity generated by them which have since been consumed by electricity consumers in Nigeria has continued to have huge negative impact on the GENCOs and their power plants such that the GENCOs corporate existence has come under and remains under severe threat.
THE GENCOs put the total amount owed them for electricity generated and supplied by them is approximately N800bn, adding that when interest is added it amounted to over N1trillion. They stated that: ‘’as a way to addressing the huge mounting indebtedness of FG and NBET to the GENCOs, the FG working with the Ministry of Power, Works and Housing, NBET, CBN and the GENCOs created as a temporary relief, i.e. the N701bn Payment Assurance Facility under which the GENCOs were to be paid for all electricity generated and supplied from January 2017 to December 2018.
‘’The process of working out of the facility and the presentation of same to the GENCOs clearly indicated that the N701bn Facility was meant to pay existing GENCOs as at the time the facility was put in place, as the target beneficiaries. ‘’The GENCOs are aggrieved that the FG has not kept faith with payments from the N701bn facility as payment timelines are not clear, regular or consistent.’’ Specifically, they stated that: ‘’only 80% of invoiced amounts are paid whenever the FG chooses to pay, with 90% of gas suppliers invoices paid directly to gas suppliers out of the said 80% payment.’’
They stated that whatever is left of any payment tranche is hardly sufficient for any meaningful activities of the GENCOs. The GENCOs stated that ‘not only that the payments are insufficient, the outstanding payments owed the GENCOs before the introduction of the N701bn Facility and the monthly shortfall payment of 20% of invoices have continued to pile up without any clear sight of how these will be paid to the GENCOs, adding that they have resisted all attempts to make the N701bn Facility appear to the public as a privilege and favour to the GENCOs. The GENCOs stated that while they appreciate the introduction of the N701bn facility, it is not a privilege and neither is it a favour to them as they are entitled to full payment for electricity generated by them at their respective costs and supplied to the national grid.
The GENCOs stated in the letter that they took loans from Nigerian banks with some of the banks leaning on international banking institutions to provide support them. They argued that it will be destructive and quite discouraging for these banks who have empathized with us and the FG in the last 4 years to realize that the FG is supporting and paying new entrants in full with all risks covered without extending the same treatment to the GENCOs. The GENCOs that: ‘’they are in a dire situation, adding that notwithstanding their commitment to the development of the power sector, not addressing the issues raised in their letter and their demands would inevitably affect the GENCOs capacity to continue to generate electricity.’’